Posted on 06/07/2005 8:14:42 PM PDT by A. Pole
In May, the Bush economy eked out a paltry 73,000 private sector jobs: 20,000 jobs in construction (primarily for Mexican immigrants), 21,000 jobs in wholesale and retail trade, and 32,500 jobs in health care and social assistance. Local government added 5,000 for a grand total of 78,000.
Not a single one of these jobs produces an exportable good or service. With Americans increasingly divorced from the production of the goods and services that they consume, Americans have no way to pay for their consumption except by handing over to foreigners more of their accumulated stock of wealth. The country continues to eat its seed corn.
Only 10 million Americans are classified as “production workers” in the Bureau of Labor Statistics non-farm payroll tables. Think about that. The United States, with a population approaching 300 million, has only 10 million production workers. That means Americans are consuming the products of other countries’ labor.
In the 21st century, the U.S. economy has been unable to create jobs in export and import-competitive industries. U.S. job growth is confined to nontradable domestic services.
This movement of the American labor force toward Third World occupations in domestic services has dire implications both for U.S. living standards and for America’s status as a superpower.
Economists and policymakers are in denial, while the U.S. economy implodes in front of their noses. The U.S.-China Commission is making a great effort to bring reality to policymakers by holding a series of hearings to explore the depths of American decline.
The commissioners got an earful at the May 19 hearings in New York at the Council on Foreign Relations. Ralph Gomory explained that America’s naive belief that offshore outsourcing and globalism are working for America is based on a 200-year-old trade theory, the premises of which do not reflect the modern world.
Clyde Prestowitz, author of the just published “Three Billion New Capitalists: The Great Shift of Wealth and Power to the East,” explained that America’s prosperity is an illusion. Americans feel prosperous because they are consuming $700 billion annually more than they are producing. Foreigners, principally Asians, are financing U.S. over-consumption, because we are paying them by handing over our markets, our jobs and our wealth.
My former Business Week colleague Bill Wolman explained the consequences for U.S. workers of suddenly facing direct labor market competition from hundreds of millions of Chinese and Indian workers.
Toward the end of the 20th century, three developments came together that are rapidly moving high productivity, high value-added jobs that pay well away from the United States to Asia: the collapse of world socialism, which vastly increased the supply of labor available to U.S. capital; the rise of the high speed Internet; and the extraordinary international mobility of U.S. capital and technology.
First World capital is rapidly deserting First World labor in favor of Third World labor, which is much cheaper because of its abundance and low cost of living. Formerly, America’s high real incomes were protected from cheap foreign labor, because U.S. labor worked with more capital and better technology, which made it more productive. Today, however, U.S. capital and technology move to cheap labor, or cheap labor moves via the Internet to U.S. employment.
The reason economic development in China and some Indian cities is so rapid is because it is fueled by the offshore location of First World corporations. Prestowitz is correct that the form that globalism has taken is shifting income and wealth from the First World to the Third World. The rise of Asia is coming at the expense of the American worker.
Global competition could have developed differently. U.S. capital and technology could have remained at home, protecting U.S. incomes with high productivity. Asia would have had to raise itself up without the inside track of First World offshore producers.
Asia’s economic development would have been slow and laborious and would have been characterized by a gradual rise of Asian incomes toward U.S. incomes, not by a jarring loss of American jobs and incomes to Asians.
Instead, U.S. corporations, driven by the shortsighted and ultimately destructive focus on quarterly profits, chose to drive earnings and managerial bonuses by substituting cheap Asian labor for American labor.
American businesses’ short-run profit maximization plays directly into the hands of thoughtful Asian governments with long-run strategies. As Prestowitz informed the commissioners, China now has more semiconductor plants than the United States. Short-run goals are reducing U.S. corporations to brand names with sales forces marketing foreign made goods and services.
By substituting foreign for American workers, U.S. corporations are destroying their American markets. As American jobs in the higher-paying manufacturing and professional services are given to Asians, and as American schoolteachers and nurses lose their occupations to foreigners imported under work visa programs, American purchasing power dries up, especially once all the home equity is spent, credit cards are maxed out and the dollar loses value to the Asian currencies.
The dollar is receiving a short-term respite as a result of the rejection of the European Union by France and Holland. The fate of the Euro, which rose so rapidly in value against the dollar in recent years, is uncertain, thus possibly cutting off one avenue of escape from the over-produced U.S. dollar.
However, nothing is in the works to halt America’s decline and to put the economy on a path of true prosperity. In January 2004, I told a televised conference of the Brookings Institution in Washington, D.C., that the United States would be a Third World economy in 20 years. I was projecting the economic outcome of the U.S. labor force being denied First World employment and forced into the low productivity occupations of domestic services.
Considering the vast excess supplies of labor in India and China, Asian wages are unlikely to rapidly approach existing U.S. levels. Therefore, the substitution of Asian for U.S. labor in tradable goods and services is likely to continue.
As U.S. students seek employments immune from outsourcing, engineering enrollments are declining. The exit of so much manufacturing is destroying the supply chains that make manufacturing possible. The Asians will not give us back our economy once we have lost it. They will not play the “free trade” game and let their labor force be displaced by cheap American labor.
Offshore outsourcing is dismantling the ladders of America’s fabled upward mobility. The U.S. labor force already has one foot in the Third World. By 2024, the United States will be a has-been country.
Riddle me this: if the experience and the tech is overseas, how are we going to be more innovative, especially with our levels of engineers and engineering students falling.
Lawyers and burger flippers aren't too innovative in tech. As for productivity, that's exportable too, especially when its tech driven.
You said you're getting an MBA? Does that include math classes? How do you figure that the US government is borrowing $2.5 billion a day?
Based on PPP "Purchasing Power Parity" measures, it is. The Chinese, in terms of exported goods, in tonnages, and based on PPP, already brag that they are a bigger industrial economy than the U.S.
Nice chart (couldn't you get one from E.P.I.?), that makes us a debt ridden beggar?
You should, in intellectual honesty, admit that it does support the contention rather well. As for its sourcing, you sound disappointed. Not going to give you the grounds for ad hominems. I could go look for one, but why should I?
If you say so.
Services and goods? Those are free?
Who said anything about free? Companies pay taxes, government provides services.
Those are charged for and subsidized by the consumer. In other words, empty investment into Corporate Welfare.
Goods are subsidized by the consumer? You're not making any sense. Well, less than usual.
Taxes? Only on money repatriated to the US. Most of that cash gets spent on cost of goods sold and resunk overseas into more investments.
So there is no profit made in the US? No taxes paid for SocSec? No property taxes, sales taxes, taxes on dividends paid to American stockholders?
Keep trying.
You first.
Please explain Purchasing Power Parity, because I don't think it means what you think it means.
You should, in intellectual honesty, admit that it does support the contention rather well.
Supports the contention that the US is a debt ridden beggar? I guess that depends on your definition of debt ridden. What's your definition?
Well, US wages are usually denominated in US dollars.Which gained about 10% against the Euro over the last 3 months.
So how do you explain non-computer sections that are the same as before or are expanding?
Pretty charts. Do you have a point?
My goodness, you give up so easily.
Look, if the "experience and tech" were overseas, we would be in the same position as the Chinese and Indians—that is, we would have to play catch up. But we are not in that position. As I indicated in a previous post, we are so far ahead of the Third World that all this scaremongering is ludicrous. The Chinese and Indians are having to catch up with us, not the other way around.
That is no reason to become complacent. To stay ahead, we must adapt to changing world conditions—something Americans used to excel at doing. It will not do to give up and declare the whole situation to be hopeless. Or to appeal to the government to shield us from "unfair" competition.
. . . especially with our levels of engineers and engineering students falling. Lawyers and burger flippers aren't too innovative in tech. As for productivity, that's exportable too, especially when its tech driven.
I would like to see more of our students majoring in engineering. That is less likely to happen if they listen to all the nonsense about the engineering jobs going overseas.
I would not disdain "burger flippers"—some of the most technology-savvy companies are in the food industries. On the other hand, feel free to say nasty things about lawyers. One of our biggest problems is that we lead the world in litigation.
Check out #227. Do you have that chart of sunspot activity? Sunspots increased because of NAFTA, right?
BTW, remember this Chinese nationalist character...he gives an idea what the Chinese think...they are true believers in the PPP:
Check this sample opinion from Sino-Maniacal egotists at AsiaWind.com out:
China will be number one
Author: Li333
Date: 10-14-04 09:13
"According to the 1992 CIA factbook, the real GNP of China in terms of purchasing power parity was already one half of the GNP of America back in 1992.
Since 1992, the GNP of China has tripled, it is now 3 times bigger than in 1992, whereas the GNP of America has only increased by one third since 1992.
In other words, the real GNP of China in terms of purchasing power parity is already bigger than the GNP of America.
Actually, the real GNP of China overtook the GNP of America in 2002.
Now, when the GNP of Japan overtook the GNP of Germany in 1968, every newspaper published the news around the world.
How come that, in 2002, when the GNP of China overtook the GNP of America, no newspapers published the news around the world? Why the discrimination against China?
By 2010, the real GNP of China will be 2 times bigger than the GNP of America.
By 2020, the real GNP of China will be 4 times bigger than the GNP of America.
By 2030, the real GNP of China will be 6 times bigger than the GNP of America, and the income per capita, the GNP per capita in China will be higher than the GNP per capita in America. In other words, Chinese incomes and wages will be higher than American wages in 2030, just as Japanese wages are already higher than American wages today.
By 2030, the average Chinese will be more wealthy and better educated than the average American.
China will be 5 or 6 times bigger and stronger than America very soon, and the world will have to stop looking down upon the Chinese people.
We can predict a future world where China will dominate financially, economically, militarily, in science and technology, culturally, with the Chinese language replacing the English language as the most important international language, with school kids in America learning Chinese as a foreign language ( and Chinese kids in China not needing to learn English anymore, since the American kids will know how to speak Chinese anyway ), with China dominating the world of media and entertainment, with Chinese movies, Chinese music and Chinese fashion designs spreading Chinese influence all over the world.
China will be number one."
Fine. So what is you advice for American workers? How can they compete with the Chinese and Indian workers who have less living expenses?
You have convinced me—the situation is hopeless. Hence my advice to American workers is to climb the nearest mountain, bridge, or tall building and jump off.
Not really.
If the problem is living expenses that are too high, then the answer is simple: reduce your expenses.
The Euro was worth $1.20 when it was created. What's it worth today?
BTW, remember this Chinese nationalist character...he gives an idea what the Chinese think...they are true believers in the PPP:
I love it when you quote commies. So, you won't explain to everyone what PPP means to you?
Wrong, we are still tredding water because we have people with experience. Unfortunetly the newest stuff is now leaving in droves, so that experience will diminish and peter out, especially as the replacement engineers will have less experience to gain.
My x-roommate who worked in development for Intel is a good example. His whole research department is now in Nizhni Novograd, he barely found a support job in Portland with Intel. Sybus moved their entire IT department to India and competitor Oracle hasn't been to far behind.
This is a good one.
Even 10 years after NAFTA total wages and salaries grew by 4% last year.
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